Significance of Compensation

Significance of compensation
Compensation is very important in the organization. It is

specifically designed to attract as well as to retain talent within the
organization. It also focuses on utilizing employee energy to gain
competitive strategy while at the same time trying to control costs
at desired levels. Attractive compensation helps to improve job
satisfaction among the employees. This is advantageous to the
organization since this leads to low absenteeism and low turnover
since satisfied workers are willing to stay in their respective
organizations.
Key features of Benefits

During the current period, it can be noted that employees expect
to earn extra apart from cash alone. This is known as benefits and
some people prefer to call them fringe benefits and they are non-
monetary form of compensation. Benefits are offered on top of the
cash pay to the employees in a bid to improve the welfare of the
employees as well as to motivate them.
Types of benefits packages

There are different types of benefit packages and employees have
the opportunity to choose benefit packages that suit their needs.
Some benefits are required by law and these include sick
and holiday pay as well as unemployment compensation. On the
other hand, it can be observed that employees can choose their
desired benefit packages from the following: vacation, health
insurance, company housing, subsidized meals as well as
educational funding for children. In some cases, benefits depend
on one’s level within the company.
Performance
Workers receive benefits regardless of their performances. In

other words, benefits are not performance based but membership
based. The other notable aspect about employee benefits is that
they usually do not affect the performance of the employees
though in some case they can lead to low satisfaction and lead to
absenteeism and ultimately turnover if they are insufficient. Care
should be taken when designing the benefit package since this can
impact the employees if the benefits are not satisfactory. It is also
important to consider associated costs.
Goals of benefits
Benefit plans are specifically designed to fulfill the needs of the

employees and they are also oriented towards the overall
objectives of the organization. Some of the goals of offering
employee benefits include the following: improve employee
satisfaction, attract new employees as well as to satisfy the
employees already working within the company.
Read more: Difference Between Compensation and Benefits |
Difference
Between http://www.differencebetween.net/business/difference-
between-compensation-and-benefits/#ixzz7Rtg39OZQ
Table indicating the differences between compensation

and benefits
Compensation
Monetary value
Compensation is performance based
Employees cannot determine their compensation
In piece-rate compensation plan, pay determined by contribution made
Meant to attract as well as to retain talented workers.
Pay offered on weekly, fortnight as well as monthly basis
Summary of the main differences between
compensation and benefits
Compensation and benefits are somehow related but upon closer

analysis, these two concepts are different. Some of the major
differences between benefits and compensation are summarized
below.
Nature of compensation and benefits

 Compensation is monetary value paid to the employee for work
done.
 Benefits are non monetary and they are an indirect form of
compensation offered on top of cash pay.
Types of compensation and benefits
 There are different types of compensation and they include the
following: basic compensation offered on weekly, fortnight or
monthly basis. The other type is commission based compensation
which is determined by level of revenue generated from sales of a
particular commodity.
 Some forms of benefits are required by law such as
unemployment compensation, sick as well as holiday pay.
Employees can also choose desire benefit package from health
insurance, vacation, subsidized meals as well as company housing
among others.
Performance
 Compensation is performance based. This can be based on
individual, group or organizational performance where employees
are given bonuses for outstanding performance.
 Benefits are not based on performance but they are membership
based. The employees are entitled to their benefits regardless of
performance.
Employee choice on compensation and benefits
 Employees cannot determine their own salaries. Factors such as
level of qualification and experience are often taken into account
when determining the level of compensation awarded to a specific
individual within the company.
 On the other hand employees can choose their benefit packages as
they see fit since they are the ones who know what they exactly
need.
Goals
 Compensation is meant to attract as well as to retain employees
within the organization. Skilled employees should offered
lucrative pay in order for them to remain in the organization.
 Benefits on the other hand are meant to improve employee
satisfaction, improving their welfare as well as motivating them so
that they can improve job satisfaction. All these factors are good
for the employees since they stay for long period in the
organization.
Conclusion
In conclusion, it can be stated that benefits and compensation are

somehow related since they have something to do with
compensating employees in particular for the work performed.
However, as discussed above, these two concepts are different.
The main difference between the two is that compensation is
monetary based while benefits include other gains that are non
monetary. Compensation itself is performance based and it is
designed to attract as well as to retain the already existing
employees in the organization. In contrast, benefits are
membership based and employees are entitled to them and
employees can choose their desired benefit package. Benefits are
also designed to improve job satisfaction as well as to motivate the
employees within the organization to improve their performance.

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Significance of Compensation

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Significance of Compensation

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Significance of compensation

Compensation is very important in the organization. It is

Key features of Benefits

Types of benefits packages

Workers receive benefits regardless of their performances. In

Benefit plans are specifically designed to fulfill the needs of the

Table indicating the differences between compensation

Compensation and benefits are somehow related but upon closer

Nature of compensation and benefits

In conclusion, it can be stated that benefits and compensation are

Read more: Difference Between Compensation and Benefits |

Read more: Difference Between Compensation and Benefits |

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